Recent reports indicate that South Africa is intensifying its efforts to exit the Financial Action Task Force (FATF) grey list by implementing robust anti-money laundering (AML) measures. In February 2023, FATF placed South Africa, along with Nigeria and 20 other nations, on its grey list due to deficiencies in their legislations aimed at combating money laundering, terrorism financing, and proliferation financing.
Being on the grey list has various consequences, including enhanced due diligence for citizens with offshore bank accounts, increased difficulties in opening overseas bank accounts, and potential economic challenges as international organizations undertake thorough audits before investing in the country.
While Nigeria faced challenges and failed to scale a recent review by the global financial intelligence agency, South Africa has showcased substantial progress. The latest FATF follow-up report on South Africa’s AML regime reveals significant improvements in various aspects, though some areas remain in partial compliance, subjecting the nation to increased monitoring until the next FATF report in October 2024.
During the FATF plenary held in Paris between October 25 and 27, 2023, Nigeria’s money laundering and terrorism financing risk were reviewed, highlighting the challenges the country faces. In contrast, South Africa’s efforts to address technical compliance deficiencies identified in the mutual evaluation of June 2021 have been acknowledged.
South Africa’s latest report saw FATF upgrading the country on 20 recommendations. Key upgrades include Recommendations 5 and 23 moving from partially compliant to fully compliant, addressing the existence of an offence of terrorist financing and the regulation of designated non-financial businesses and professions (DNFBPs).
Other recommendations, including 1, 7, 10, 14, 18, 22, 24, 25, 26, 27, and 28, have been upgraded from partially compliant to largely compliant. These cover areas such as customer due diligence, money transfer services, foreign branches, beneficial ownership transparency, and supervision powers.
FATF also recognized South Africa’s success in upgrading Recommendation 12 on politically exposed persons from non-compliant to largely compliant. Recommendation 17, concerning firms’ reliance on third parties, was changed from non-compliant to ‘not applicable.’
However, South Africa still faces work on five recommendations: 2, 6, 8, 15, and 32. These relate to national coordination of AML efforts, targeted financial sanctions related to terrorism, non-profit organizations, and new technologies such as virtual currencies and cash couriers.
Despite the progress made in 2023, South Africa will remain in enhanced follow-up until the next FATF report in October 2024. The country has notably implemented laws requiring compulsory registration of trust and company beneficial ownership, demonstrating its commitment to meeting FATF recommendations.
The FATF recommendations provide a comprehensive framework for countries to combat money laundering, terrorist financing, and the financing of weapons of mass destruction, emphasizing the importance of timely access to accurate and up-to-date beneficial ownership information. South Africa’s continued efforts reflect a commitment to global AML standards.
